Creditors still fret despite Cuba improvements

* Cuba says trade balance in the black after 2008 deficit

* Little cash seen available to pay debts

* State loosens hold on export industries

By Marc Frank

HAVANA, Dec 21 Cuba managed to stop the
hemorrhaging of foreign exchange that left it unable to pay
many bills the past year, officials said this weekend, but
creditors who are owed an estimated $2 billion do not expect to
be paid in full any time soon.

Cuban officials told the National Assembly over the weekend
the country's economic crisis had stabilized, but government
spending would be limited in 2010 as the island continues to
deal with effects of devastating hurricanes in 2008 and the
global financial meltdown.

Cuba, which is heavily dependent on imports, stopped paying
many suppliers last year and froze the Cuban bank accounts of
most foreign companies operating on the island as the crisis
drained its cash reserves.

Economy Minister Marino Murillo told the assembly that the
government had turned 2008's $2.3 billion trade deficit into a
surplus of $400 million by cutting imports 37.4 percent, or $6
billion, this year.

That, he said, helped offset a 22.9 percent drop in
exports, or $3.1 billion, caused by plummeting prices for
Cuba's key export products including nickel, tobacco, lobster
and technical assistance to oil producing clients such as
Venezuela and Angola.

Murillo said Cuba's overall economy grew 1.4 percent in
2009, down from 4.2 percent the previous year, and would put in
a similar performance in 2010.

Murillo did not say if the government had improved the
country's cash reserves, which are never publicly disclosed,
but did tell the assembly that spending would be dictated by a
simple principle.

"The amount of foreign exchange we plan to spend in 2010
will be less than the income we expect," Murillo said.

Regarding debt, he said, "Negotiations with some countries
and suppliers to restructure debts and guarantee payment under
more favorable conditions have begun."

LITTLE TO CHEER

His words brought little cheer to creditors, who had hoped
for a signal that the money they are owed would be forthcoming.

"I see nothing in Sunday's report that indicates
significant amounts of money will be generated or put aside to
pay fresh debt racked up to suppliers and banks this year," a
foreign businessman, who asked his name not be used, said on
Monday.

"Further, I see nothing indicating fresh money flows from
current or new exports," he said.

There was a little bit of good news from President Raul
Castro, who told the assembly that the government had unblocked
about 30 percent of funds of the frozen bank accounts of
foreign companies.

There have been estimates that as much as $1 billion has
been locked up in the accounts.

Castro, who took over for his ailing brother Fidel Castro
in 2008, has repeatedly called for making the communist system
more productive and efficient to ease its chronic economic
problems.

Murillo said in his speech the government would loosen its
stranglehold on the finances of export industries such as
nickel and tobacco, and foreign exchange earners such as
communications and tourism.

Few details were provided, but it appears that the change
will allow state companies to retain a percentage of their
earnings instead of handing all profits over to the government,
which then allocates them as is currently done.

Osvaldo Martinez, head of the National Assembly Economic
Commission, said the new system was aimed at ensuring that the
companies will have the foreign exchange they need to guarantee
production "with priority over any other use" by the state.

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